Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Presentation (September 2008)
36 slides from Fletcher Building's investor presentation, Sep 15, 2008
Slide 1: Presentation to Analysts Evendale Ohio USA 12th Sept 2008
For personal use only Presentation to Analysts Evendale Ohio USA 12th Sept 2008
Slide 2: Cautionary Statement
FORMICA GROUP CAUTIONARY STATEMENT For personal use only This presentation contains not only a review of operations but also some forward looking statements about Formica Corporation and its parent Fletcher Building and the environment in which the companies operate. Because these statements are for
Slide 3: Formica Group regions and sites
FORMICA GROUP North North America America Region Region European European Region Region Asian Asian Region Region For personal use only Kolho, Finland Perstorp, Sweden Newcastle, U.K. Vancouver BC Aycliffe, U.K. . Warsaw, Poland St. Jean, Canada Quillan, Fr St. Avold, France. Evendale, OH Mt Bethel
Slide 4: Product Portfolio
FORMICA GROUP PRODUCT PORTFOLIO For personal use only Other Laminates are resin-treated papers, highly resistant Stone & Granite 2% 1% to abrasion and impact, that provide design and Solid Surface wear benefits for countertops, cabinets and furniture 5% Manufactured Compact and Thick stock products
Slide 5: Channels to Market
FORMICA GROUP CHANNELS TO MARKET For personal use only • Products are marketed directly to OEMs and fabricators, as well as through established distributors to the commercial and residential end markets Nth America Europe Asia Distribution, 38% Direct, 47% Distribution, Distribution, Direct, 49% 53%
Slide 6: Product End-Use Applications
FORMICA GROUP PRODUCT END-USE APPLICATIONS For personal use only • The majority of the Company’s sales are made to the repair and remodel segment of both the commercial and residential construction markets • Formica’s exposure to the volatile residential new construction market is limited Nth Americ
Slide 7: Formica Europe
FORMICA GROUP FORMICA EUROPE For personal use only 7% HPL Market Analysis 7% Compact Solid Surfacing • U.K. HPL market share leader dominating Other residential furniture category through large customers 15% • Spain HPL market share leader with even an even split between residential and commercial •
Slide 8: Formica Asia
FORMICA GROUP FORMICA ASIA For personal use only Market Analysis 2% HPL 13% • China is primarily focused on the higher margin Compact commercial HPL market, with significant growth Solid Surfacing opportunities. Currently adding extra capacity. Other • Hong Kong has leveraged strong demand for hard
Slide 9: North America
FORMICA GROUP NORTH AMERICA For personal use only 1% HPL Market 9% 3% Compact • United States primarily HPL and Solid Solid Surfacing Surface sheet business. Other • Focus on Big Box retailers. • Commercial demand driven by A&D sales specialists • Canada HPL market leader • Mexico sells primarily lo
Slide 10: Progress Since April 2008
FORMICA GROUP PROGRESS SINCE APRIL 2008 For personal use only North America • Market - US market continues to be challenging in all segments • Restructure - Closed Global office in Cincinnati and restructured business to give Regional Management more control over local manufacturing units - Realigne
Slide 11: Progress Since April 2008 (continued)
FORMICA GROUP PROGRESS SINCE APRIL 2008 (continued) For personal use only North America (cont) • Progress is being made across a number of fronts including distribution review, margin management and new product development Asia • Market - Demand remains firm - Focus is on growing residential penetra
Slide 12: Progress Since April 2008 (continued)
FORMICA GROUP PROGRESS SINCE APRIL 2008 (continued) For personal use only Europe • Market - Spain and UK softer but Nordic, Benelux and Eastern Europe still firm. • Growth - Commenced capacity expansion at Formica Finland through the relocation of the New Zealand press General • Pricing - Significan
Slide 13: For personal use only
FORMICA NORTH AMERICA For personal use only FORMICA NORTH AMERICA Presentation to Analysts Evendale Ohio USA 12th Sept 2008 13
Slide 14: Business Profile
FORMICA NORTH AMERICA BUSINESS PROFILE For personal use only Internal Snapshot The Market Formica Strengths • Employees – 1, 216 • Market Size • Brand • Manufacturing Plants – 2 9 HPL – 1.2 billion s.f. • Design • Distribution Centers – 7 9 Solid Surface - $500m • Plate Technology – textured visuals
Slide 15: Product Application - Commercial
FORMICA NORTH AMERICA PRODUCT APPLICATION - COMMERCIAL For personal use only • Commercial Furniture – Laboratory Tops – Bartops – Game Tables – Salad Bars – Buffet Countertops – Cabinets – Workstations • Commercial Construction – Doors – Millwork – Walls – Countertops – Desk / Serving Tops • Store F
Slide 16: Product Application - Residential
FORMICA NORTH AMERICA PRODUCT APPLICATION - RESIDENTIAL For personal use only • Kitchen & Bath – Countertops – Cabinets – Backsplashes – Shower / Tub Surround • Residential Furniture – Tabletops – Bedroom Suites – Entertainment Centers – Home Office Furniture – Night Stands Presentation to Analysts
Slide 17: Business Overview
FORMICA NORTH AMERICA For personal use only Business Overview Presentation to Analysts Evendale Ohio USA 12th Sept 2008 17
Slide 18: Key Issues
FORMICA NORTH AMERICA KEY ISSUES For personal use only • Organization - Reporting Structure - Right-Size the Business • Operational - Evendale Plant Improvements - Service Model • Revenue - Price Increase/Fuel Surcharge - Continued Innovation/New Product Development Presentation to Analysts Evendale
Slide 19: Focus on Segmentation to Drive Results
FORMICA NORTH AMERICA Focus on Segmentation to Drive Results GO TO MARKET FlOW For personal use only Residential End User Retailer Distributors * 22 Companies Fabricator * 150 Locations General End User Commercial Contractor Owner Formica Direct Accounts * Home Centers * Postformers * Commercial OEM
Slide 20: Innovation: Leader in Premium Finishes
FORMICA NORTH AMERICA Innovation……Leader in Premium Finishes Industry’s 1st Premium Textured Finish • 1 out of every 3 sq. ft. of Formica HPL For personal use only sold residentially is Etchings and Honed • Approx twice value of standard laminate • Entry card with Big Builders and Home • Etchings Ce
Slide 21: Innovation: 2008 Introduction
FORMICA NORTH AMERICA Innovation……2008 Introduction RADIANCE UPDATE For personal use only • Multi-gloss level that resembles natural Granite • More Realistic Visual 9 Smooth Finish for Easy Maintenance 9 Advantageous Price 9 6 New Colors 9 3 Existing Granites 9 3 Existing Quarstones Radiance Launch
Slide 22: Distribution Strategy
FORMICA NORTH AMERICA Network Designed for Maximum Efficiency DISTRIBUTION STRATEGY For personal use only Objective: Align and grow with Independent Distribution companies that are best-in-class in these areas: • Sales Coverage • Marketing • Logistics • Product Lines • Technology • Financial Strengt
Slide 23: Current Market Conditions
FORMICA NORTH AMERICA For personal use only Current Market Conditions Presentation to Analysts Evendale Ohio USA 12th Sept 2008 23
Slide 24: Residential Market Conditions
FORMICA NORTH AMERICA RESIDENTIAL MARKET CONDITIONS Building Permits Home Depot / Lowe’s Same Store Comps and Forecast (Proxy for Remodel) For personal use only Home Depot / Lowe's Same Store Sales Home Depot Lowe's 2,400 2,200 2,000 15% Annual Permit Rate Same Store Sales % Change 1,800 10% 1,600 5
Slide 25: Commercial Market Conditions
FORMICA NORTH AMERICA COMMERCIAL MARKET CONDITIONS Retail Offices Retail Offices Building Contract Activity Building Contract Activity For personal use only Hotels Education & Dormitories Hotels Education & Dormitories (SF Millions) Health Care ($US Billions) Health Care $80 350 $70 300 $60 250 $US
Slide 26: USA Volume of Work Commenced
FORMICA GROUP USA VOLUME OF WORK COMMENCED For personal use only $b in constant 200 prices Engineering construction 600 Non-residential Residential 500 7% -1% 10% 400 9% 3% 2% - -2% 3% 0% -2% -4% 300 4% 1% 6% 1% -6% -8% 200 12% -4% 18% 100 24% -33% 8% 0 2004 2005 2006 2007 2008 f 2009 f 2010 f 2011
Slide 27: Business Cycle Analysis
FORMICA NORTH AMERICA BUSINESS CYCLE ANALYSIS For personal use only Industry 2008 Outlook Housing Starts Negative - Decline to late 2009 Existing Home Sales Negative - Ongoing decline in 2008 Home Improvement Construction Negative - Further decline Building Materials Retail Negative - Decline throug
Slide 28: Operations Overview
FORMICA NORTH AMERICA For personal use only Operations Overview Presentation to Analysts Evendale Ohio USA 12th Sept 2008 28
Slide 29: North America Sites
FORMICA NORTH AMERICA NORTH AMERICA SITES For personal use only Vancouver, BC - DC ST. JEAN, CANADA- HPL & DC Previously 3rd HPL Manufacturing facility Mt. Bethel, PA - DC in California Mt. Comfort, IN - DC Evendale, OH - HPL Bakersfield, CA – DC Atlanta, GA - DC ODENTON, MD Dallas, TX - DC Puerto R
Slide 30: Manufacturing Consolidation, Operational Efficiency Improvement
FORMICA NORTH AMERICA MANUFACTURING CONSOLIDATION, OPERATIONAL EFFICIENCY IMPROVEMENT STILL UNDERWAY For personal use only Despite transition challenges, the logic for North America production consolidation holds true. A path to recovery of projected performance exists Logic for Consolidation: • Exc
Slide 31: Service Levels: Impact and Recovery Actions to Date
FORMICA NORTH AMERICA Service Levels (Customer Fill Rates) IMPACT & RECOVERY ACTIONS TO DATE For personal use only Impact of Consolidation challenges: Service: • Production volume could not keep up with demand • Inventory declined impacting service Cost: • Scrap rates well above target levels • Prod
Slide 32: Continuation of Evendale Recovery Efforts
FORMICA NORTH AMERICA CONTINUATION OF EVENDALE RECOVERY EFFORTS use only Evendale is implementing a relentless approach to shop floor improvements, leveraging the lean expertise from Formica Europe: David Pallas (VP, Global Operations) and team • Intensified approach to Evendale shop floor managemen
Slide 33: Evendale Plant Tour
FORMICA NORTH AMERICA For personal use only EVENDALE PLANT TOUR TOUR GUIDES Mitch Quint Vice President Operations North America Mark Ferguson Evendale Plant Manager Dale Setty Production Manager Presentation to Analysts Evendale Ohio USA 12th Sept 2008 33
Slide 34: History of Cincinnati Manufacturing
FORMICA NORTH AMERICA FORMICA HISTORY OF CINCINNATI MANUFACTURING For personal use only Formica’s First Factory on 2nd & Main, Formica’s Move to Spring Grove Ave., May 1913. circa 1921. Bottom RHS Ground was broke for the new Evendale site was June 28, 1950. It was opened February 5, 1951. Presentat
Slide 35: Evendale Facility
FORMICA NORTH AMERICA EVENDALE FACILITY For personal use only • Site 123.7 acres • Facility size 850,000 sqft - Production area : 650,000 sqft - Logistics: 200,000 sqft • Administration Buildings - NAHQ & Divisional 118,000 sqft • Shift Schedule 3 shifts/ 5 days • Total employees ~410 Presentation t
Slide 36: Manufacturing Process
FORMICA NORTH AMERICA MANUFACTURING PROCESS For personal use only Surface Treaters 3 Melamine Treaters Raw Materials Collation Press Finishing 5 Presses Finishing Kraft Treaters 2 Phenolic Treaters Presentation to Analysts Evendale Ohio USA 12th Sept 2008 36
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